Sir John Bourn, head of the National Audit Office, reported today that the Office of Government Commerce (OGC) has had a positive impact in improving departments procurement of goods and services but that there are several key areas for improvement. The NAO report confirms that by 31 March 2003 departments had generated savings of 1.6 billion which exceeds the OGCs target of 1 billion, with 85 per cent of improvements coming from nine departments. Departments will need to do more if OGC is to meet the more ambitious target of an additional 3 billion in savings by 31 March 2006.
The OGC has played a key role in raising awareness of procurement issues and providing advice to departments and agencies. The development of professional procurement skills and a number of framework agreements for purchasing goods and services have contributed towards overall savings. Gateway Reviews provide a well-defined process for managing large, complex and novel procurements and OGCs introduction of them has been popular with departments.
Procurement practice is also more developed in the United Kingdom when compared to four other European countries; for example through a higher profile for procurement generally as a result of OGCs activities with departments, the existence of teams in departments with responsibility for providing procurement advice, and the range and quality of guidance available to help procurement staff in departments.
The NAOs examination of procurement across 86 departments, agencies, and non-departmental public bodies found that adherence to the best practice promoted by the OGC varies. For example, while 80 per cent of the bodies surveyed had a head of procurement, the post only had board status in 13 per cent of cases. Less than one-quarter of designated procurement staff had a professional qualification from the Chartered Institute of Purchasing and Supply. Of the twenty top spenders on procurement in 2002-03, only three had commercial directors whose role explicitly covers all engagement with the private sector.
The NAO found that departments and agencies need to improve their capability in seven key areas: raising commercial awareness; having better and more up-to-date management information, particularly on current market prices; increasing joint purchasing between departments; more proactive management of suppliers; managing the risk of relying on too small a number of suppliers for key commodities; developing procurement expertise; and better targeting of value for money improvements.
The NAO has also identified a number of areas which offer further potential for value for money gains to be achieved by departments if they act on the good practice and other initiatives put in place by OGC, and the report illustrates where 300 million such savings could be achieved. These include the more widespread use of framework agreements, bringing maverick spending (spending undertaken outside authorised buying arrangements) under control, wider use of the Government Procurement Card, and reducing internal processing costs. Departments also need to look for ways to open up the marketplace to make it easier for suppliers to compete for government business, especially smaller suppliers than can be a source of innovation from which public services can benefit.